October 17, 2016
This year marks a turning point as the Paris Agreement on climate change will come into force on November 4th, just in time for the next United Nations climate conference in Marrakesh, Morocco (COP22). Unlike the famous Kyoto Protocol before it, this agreement requires all participating countries to make increasingly aggressive greenhouse gas (GHG) reduction targets called “Nationally Determined Contributions” (NDCs) once every five years and report on their progress annually. A total of 188 countries submitted NDCs, of which 73% included GHG reductions from the agriculture sector and 78% included GHG reductions from land use, land use change and forestry (LULUCF). Section five of the Paris agreement encourages countries to reduce emissions from deforestation and forest degradation (REDD+), signaling to the private sector that international climate finance will flow to sustainable forest-related investments.
For countries to achieve land-use related climate targets, they need to engage the private sector, since corporate agriculture drives at least 71% of tropical deforestation globally. An increasing number of companies have committed to removing deforestation from commodity supply chains. These commitments are spurred by environmental campaigns, shareholder motions, industry group pledges, and UN Declarations. Recent research confirms that, collectively, corporate commitments can increase the amount of land protected beyond that of existing governmental regulations in some places like Indonesia and the Brazilian Amazon. Realization of corporate deforestation ambitions will require policy coordination with governments.
Collaboration between countries and companies could generate a positive feedback loop whereby countries remove barriers to and create incentives for sustainable production, making it easier for companies to implement more rigorous sustainability targets. Public-private partnerships around establishing more affordable and sophisticated satellite monitoring systems for tracking agriculture-driven deforestation have been mutually beneficial (see JBS below). Enhanced reporting requirements under the NDCs may allow companies to link their performance with national and subnational GHG inventories and accounting.
Recognizing that land use decisions are made at the jurisdictional level, while at the last climate conference in Paris, a group of seven companies considered preferentially sourcing commodities from greener jurisdictions. In the end, only Unilever and Marks and Spencer signed the resulting "Produce and Protect"statement, which prioritizes jurisdictions with effective strategies for monitoring GHG emissions from land use change, increasing productivity, and ensuring social and environmental safeguards. Now that companies have begun to establish their expectations, it is up to jurisdictions to demonstrate their preparedness to meet sustainability criteria.
A number of tropical jurisdictions are working toward reducing deforestation and promoting low emissions development. As an example, Mato Grosso’s Governor launched his “Production, Protection and Inclusion Program” at the Paris climate conference last December with the aim of both increasing agricultural productivity and socioeconomic inclusion for smallholders, while reducing deforestation in the Amazon by 90% by 2030. With a US $10 billion pricetag over 15 years, Mato Grosso is partnering with the multi-stakeholder group, IDH Sustainable Trade Initiative, which aims to attract international investments for the strategy by connecting the jurisdiction with international commodity markets.
Many multi-stakeholder groups and coalitions are recognizing a potential synergy between preferential sourcing from jurisdictions that implement forest and climate initiatives and REDD+, especially when many jurisdictions have already received REDD+ finance to strengthen capacity for monitoring, reporting and verifying forest protection. For instance, the Governors’ Climate & Forests Task Force’s Rio Branco Declaration has signaled the intention among many jurisdictions to seek performance-based financing to reduce deforestation and GHG emissions, including those related to agriculture. Yet it remains to be seen if preferential sourcing of agricultural commodities by private companies can be channeled to help to support jurisdictional and landscape-based approaches, and if international climate finance can reach companies engaging in environmental reforms.
Ultimately, COP22 could serve as a viable stage for jurisdictions and companies to raise ambitions together.
More stories about changing supply chains are summarized below, so keep reading!
-The Supply Change team
Innovation Forum: How business can engage smallholder farmers
Washington, DC, 19-20 October 2016
Forest Trends’ Supply Change project invites you to join us at an Innovation Forum conference addressing the major risks for smallholder farmers across agricultural sectors, and how to create scalable solutions to tackle future supply chain vulnerabilities. The event will focus on how US-based companies can engage – and are engaging with – smallholder farmers in key agricultural areas to improve yields and become more sustainable.
Register and learn more about the event here.
Innovation Forum: How business can tackle deforestation
London, 21-22 November 2016
As a Supporting Partner, Forest Trends’ Supply Change project invites you to join us at an Innovation Forum conference next month. This international multi-stakeholder meeting is designed to provide practical guidance for the implementation of zero deforestation policies. Already confirmed participants include senior representatives from the likes of Unilever, Nestlé, Mondelēz International, McDonald's Corporation, Hewlett Packard, Walgreens Boots Alliance, Henkel, Oxfam, Greenpeace, FSC, and many more.
Any contacts of ours are eligible for a 15% discount to attend the event. Please use the coupon code SC15 when registering online here.
FLEGTling bird leaves the nest
For the first time in history, a shipment of wood that has undergone a new and rigorous legal certification is about to be exported from Indonesia to the European Union (EU). As part of its FLEGT (Forest Law Enforcement, Governance and Trade) action plan to prevent illegal wood from entering EU markets, the EU has secured bilateral trade agreements with Indonesia and 14 other exporting countries to prepare for the FLEGT certification. FLEGT certified wood could be valuable for EU importers because the strong licensing system allows the wood to bypass onerous import due diligence checks which are usually required under the EU Timber Regulation. This achievement represents over a decade’s worth of planning and has the potential to evolve into a powerful market-based sustainability tool.
Read more from Ecosystem Marketplace
Mixed palm oil, mixed results
Many leading companies like Walmart, Danone, and Krispy Kreme Doughnuts received top marks for switching to 100% Roundtable of Sustainable Palm Oil (RSPO)-certified sustainable palm oil (CSPO) according to the World Wildlife Fund’s (WWF) recently released 2016 palm oil scorecard. Yet out of the 134 consumer goods manufacturers, retailers, and food service companies reviewed by WWF, there are many others that had made little to no progress in switching over to CSPO. The scores have helped identify leaders and laggards in commitment implementation. WWF focused on European, North American, and Japanese companies with RSPO-oriented commitments, leaving room for expansion in their next assessment.
Read more from TriplePundit
Recent evidence suggests that one of Malaysia’s largest palm oil traders, IOI, has not complied with its sustainability policy despite the company’s assurances to the contrary. The environmental watchdog Greenpeace published their findings a month after the multi-stakeholder certification group, the Roundtable on Sustainable Palm Oil (RSPO), reinstated IOI after determining that the company’s public plans, if executed properly, could address the environmental and social complaints lodged against the company. Greenpeace activists also teamed up with two Indonesians hurt by last year’s forest fires to block IOI from unloading its palm oil, in protest of the RSPO decision and IOI’s ongoing environmentally damaging activities. In response, IOI leadership acknowledged Greenpeace’s concerns, but emphasized the need for an industry-wide agreement to address these challenges.
Read more on the Food Navigator.
Helping the little guys
The Peruvian state-run bank, Agrobanco, will develop a US $88 million line of credit to enable small farmers to increase sustainable agricultural production and prevent local deforestation in San Martin, Peru. This comes after Agrobanco signed a memorandum of understanding with two environmental nonprofits CEDISA and Global Canopy Programme (GCP), which will provide technical support. With small-scale agriculture contributing to 75% of local deforestation, Simone Bauch, GCP’s director in Latin America, asserts that this program will help Peru achieve its 2021 target to reduce deforestation by 54 million hectares. Agrobanco’s outgoing president, Diaz Ortega, suggested this partnership could develop a pipeline for green investments which would ultimately help Peru in meet its NDC under the Paris Agreement.
Read more at Mongabay.com.
Amazon beef is back on the menu
Amazonian-grown beef will be sold again in McDonald’s stores in Brazil for the first time since 1986. The company will supply an increasing amount of sustainably raised beef says Leonardo Lima, the sustainability head at McDonald’s largest franchisee company in the world, Arcos Dorados. The beef will come from ranches involved in the Novo Campo Program, which helps ranchers avoid causing new deforestation for cattle production in Mato Grosso, Brazil. With funding from the Athelia Climate Fund, the program aims to raise 340,000 head of cattle using best agricultural practices on 100,000 hectares of previously degraded land. Already, the 14 landowners piloting the agricultural practices have achieved higher productivity and profitability than their peers.
Read more at the Energy Desk.
RACking up the green
Last week, the Malaysian palm oil giant Sime Darby released a new and improved sustainability policy called the Responsible Agriculture Charter (RAC). Then it immediately placed 316 million shares of stock for sale-thought to be worth US $570 million. The tight timing between the release of the RAC and the announcement of the equity sale suggests that the outcome of the sale could be an indicator for investors to assess the weight of forest risk. Under the RAC, producers are obligated to initiate soil management, GHG reductions, and peatland protection as well as High Carbon Stock assessments before clearing land. This comes at a pivotal time when investors are beginning to consider deforestation risk when choosing investments. The RAC could boost Sime Darby’s net income.
Read more from the Jakarta Globe.
Whatchu Ghana do with the money?
Great news from Ghana - it won US $24 million in financing for sustainable forestry just one day after ratifying the Paris Accord. As Ghana’s first public private partnership in the forestry sector, this partnership receives co-financing from the public Climate Investment Funds' Forest Investment Program and the African Development Bank. The project partner Form Ghana, a private Ghanaian company, pursues sustainable plantation management and tries to attract new investors to the sector. Two major management practices which may have leant credibility to the agreement are the expansion of Forest Stewardship Council and Verified Carbon Standards certifications. The project is expected to increase local livelihoods, meet the rising demand for forestry products, and avoid pressure on protected forest lands.
Read more from the African Development Bank
Monthly Insights from the Supply Change Desk
Each month, the Supply Change team reviews hundreds of corporate commitments to reduce deforestation in their commodity supply chains. Sometimes we come across unique strategies which are worth sharing. In this new feature we include examples of recently reviewed companies which have caught the attention of the Supply Change team because of their diligence or innovation at crafting, implementing, or reporting on their commodity sourcing commitments. Let us know what you think of the new feature, email@example.com.
After having made sustainable commodity commitments, many companies struggle with the next step of measuring their implementation and impact. Ferrero is an example of a company that made a specific, time-bound, feasible, ambitious commitment with clear and measurable milestones, and then delivered on its promise. According to Ferrero’s fifth palm oil progress report (29-07-2016) this high-flying Italian chocolate maker traced nearly 100% of its palm oil back to the plantation. Then it fundamentally reorganized its procurement strategy by cutting ties with all non-compliant suppliers and finding new RSPO segregated supply for 90,000 tons, or 50% of its entire palm oil volume. Ferrero’s efforts have earned it substantial palm oil sustainability scores from WWF, Forest 500, and Greenpeace.
Read more about Ferrero's commitments.
Companies may find managing and monitoring deforestation risk in cattle supply chains to be especially difficult without an industry-supported certification scheme. The world’s largest protein producer, JBS, provides an example of how increasingly sophisticated satellite monitoring systems and partnerships can help companies verify compliance and realize zero deforestation commitments. By the end of 2015, the company blocked purchases from 2,299 out of 67,000 company-registered farms because of daily satellite monitoring of land use change and cross-checks with government lists of documented worker exploitation. Annual third party auditing verified that JBS has achieved over 99% compliance for the third year in a row. JBS also offers customers the ability to verify the name and the location of the raw materials in many of its products.
Read more about JBS's commitments.
The introduction in our September newsletter incorrectly identified Bayer as supporting a smallholder project in Indonesia. Henkel, not Bayer, and most recently BASF support the project in West Kalimantan run by the development organization Solidaridad and several other non-profits.
Read Henkel’s press release for more details.